Office lease slowdown
Manhattan office space is still scarce and pricey, but leasing activity - particularly for large amounts of space - is slowing, according to a report from real estate firm Cushman & Wakefield released yesterday.
Available Manhattan office space fell 2 percentage points from year-end 2003 through the second quarter of 2005, and the vacancy rate is now only 9.8 percent. That's the lowest percentage since the fourth quarter of 2001. In addition, overall asking rents rose to $40.80 a square foot, up from $39.55 as of the end of 2004. However, the market stands at a "tipping point" that could pull it down, said Cushman & Wakefield executive managing director Ken Krasnow.
"There is a level of uncertainty in the local and overall economy," Krasnow said at a media breakfast meeting yesterday in midtown.
Another report, by the real estate firm CB Richard Ellis, found that leasing activity in Manhattan was down 30 percent in June compared to May.
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In addition, while rent prices have slightly picked up in lower Manhattan, the gap between asking rents in midtown and downtown is the widest it has ever been; asking rents for office space downtown are about $17 a square foot lower than average midtown prices. Krasnow emphasized that political leaders need to continue to focus on rebuilding, including transportation and commercial redevelopment to help the financial district reach its full potential.
"It needs the immediate attention of the city's key decision-makers," Krasnow said, noting that Washington, D.C., has now surpassed downtown Manhattan to become the third-largest office market, trailing only midtown Manhattan and Chicago. Downtown has been successful in recruiting residential tenants and developers. But while downtown commercial rents are significantly lower than other parts of Manhattan, many large-name office tenants who want marquee addresses like midtown.
The leasing market for retail space continues to be strong in Manhattan because consumer-oriented companies including banks, electronic companies such as Apple Computer and makers of luxury goods are using storefronts as branding opportunities, Krasnow said.
The second quarter of 2005 also was marked by blockbuster real estate deals. The $1.7-billion sale of the MetLife building over Grand Central Terminal to Tishman Speyer is believed to be a record price for any single building in the world.
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